Testimony Before the National Gambling Impact Study Commission

Madam Chairman and members of the commission, I appreciate having this opportunity to offer my thoughts on what has been an interesting 20 months or so. I believe we have all been through an extremely useful process and that much has been learned.

I would like to begin by recalling the testimony Congressman Frank Wolf delivered to this panel at the beginning of your deliberations. He indicated that while the task before you was challenging, it was — in his words — “very simple.” With the past 20 months under your belts, I’m not sure you would agree that your task has been “simple,” but the congressman went on to clarify his meaning:

Today when a community, a town, a city, or even a state is considering the pros and cons of letting some kind of gambling activity start up, they have nowhere to go to obtain reliable and factual and unbiased answers to their questions. Your job is merely to make that information easily available to them. That’s it.
You have met 17 times and traveled from coast to coast seeking “reliable and factual and unbiased answers to their questions.” Scores of witnesses have testified and many thousands of pages of material have been transcribed.

Looking again at the words of Congressman Wolf on that day when he discussed your mission, he said:

What I do ask — and what America demands of you — is to be open—minded, fair, and undaunted in the pursuit of knowledge based on solid research.
In that spirit, the casino entertainment industry cooperated in every way possible to provide what you would need to gain this knowledge based on solid research. To that end, we recommended speakers for your site visits. We opened up our places of business for the NORC patron survey and identified casinos for the casino survey. We made numerous presentations before the National Research Council, and we testified before this group. You also heard many hours of testimony by employees from our industry and others who informed you on what we are all about

We also provided a wealth of studies, research, articles and other material in the interest of an “open—minded, fair, and undaunted pursuit of knowledge.” Among the studies we recommended to you were:

Estimating the Prevalence of Disordered Gambling Behavior in the United States and Canada: A Meta—analysis conducted by Harvard Medical School Division on Addictions.

The Impact of Riverboat Casino Gambling on the Illinois Economy 1995 conducted by the Regional Economics Applications Laboratory.

Limitations in the Workplace: A Survey & Study of Atlantic City Casinos conducted by the Bureau of Economic Research at Rutgers University.

The Economic Impact of Gaming in Missouri conducted by professors Charles Leven and Don Phares.

Suicide and Gambling: An Analysis of Suicide conducted by professors Richard McCleary and Kenneth Chew.

Employment and Earnings Associated with the Deadwood Gaming Industry and Gaming in South Dakota: A Statistical Description and Analysis of its Socioeconomic Impacts conducted by Dr. Michael K. Madden.

Casinos and Crime: An Analysis of the Evidence conducted by Jeremy Margolis.

Economic Impacts of Casino Gaming In the United States, Volumes 1 and 2 and an Examination of the Micro—Economic Impacts of Casino Gaming in Iowa conducted by Arthur Andersen L.L.P.

Gaming Industry Employee Impact Survey conducted by Coopers & Lybrand L.L.P.
You were also presented with annual reports, data and statistics from various state gaming officials.

Today, you should have briefing books chock full of “reliable and factual and unbiased answers” to those questions that will inform — in Congressman Wolf’s words — “a community, a town, a city, or even a state considering the pros and cons of letting some kind of gambling activity start up.”

Adding to the directive of Congressman Wolf, Commission Chair James stated very early in this process that you were, “to do what the American people, through their elected representatives in Congress, have asked us to do, and that is to conduct a comprehensive, factual, and legal study of the social and economic impact of legalized gambling.”

I would like to briefly take you through a sampling of the information provided to this commission during your hearings, which should be carefully considered as you strive to meet your statutory responsibilities. I will then go on to describe our recommendations in each of these areas.

SUMMARY OF INFORMATION RECEIVED BY NGISC

Until recently, we were compelled to rely on economic models and theories in order to study our relatively young and maturing casino entertainment industry. That is no longer the case. Economic models and theories can now be evaluated through the prism of experience. The experience of the last four or five years in a number of states that are new venues allows us to better understand the economic impacts of gaming on state and local communities. We can now produce actual, reliable, factual and unbiased results by studying independently derived statistical data from state and local governments across the country. I have referred to a small sample of the material that has resulted from the work of respected authorities.

And these “actual, reliable, factual and unbiased results” show that the casino gaming industry creates billions of dollars in revenues every year…$20.5 billion in 1997. The industry employs more than 700,000 Americans both directly and indirectly and pays annual wages of $21 billion. Casino gaming employs more people than the soft drink, cellular phone services, videocassette sales and rentals, and cable television industries.

Casino gaming companies contribute an estimated $3 billion annually in federal, state and local tax payments, and this sum does not include the billions of dollars in taxes paid by our gaming employees. These revenues go toward education, libraries, urban renewal, infrastructure improvements, benefits for the disabled and elderly, historical renovation and other similar purposes.

Capital investment by the casino industry is a boon to every jurisdiction in which it is located. The investment—to—profit ratio for the major casino companies is often as high as 3—to—1. As you have learned from information provided to this commission, in Atlantic City alone, casino gaming has generated an investment of approximately $6 billion during the past 20 years. In Mississippi, more than $7 billion has been invested in construction of casinos, hotels, retail outlets, golf courses, parking structures and other amenities.

And contrary to what some of the economic models and theories would have you believe, we now know from the reliable, factual and solid research available today that the casino gaming industry is a proven creator of economic growth. In every jurisdiction where it has located, gaming has spawned a wide variety of secondary growth, helping to diversify the resident economies. Commercial and residential construction have increased along with retail sales. Restaurants and entertainment venues in almost every jurisdiction have also seen an increase in business with the arrival of gaming in a community.

Many of those who testified before you presented hard information on the economic growth spawned by gaming. Among these witnesses was Jimmy Heidel, executive director of the Mississippi Department of Economic and Community Development. In testimony typical of those who discussed this subject, Mr. Heidel noted that:

From an economic development perspective, legalized casinos in Mississippi have spawned a variety of secondary growth, all of which is helping to diversify the Mississippi economy: hotels, golf courses, restaurants, related food services.
And I also add home building, retail, realtor services, hardware stores, retail stores media advertising, printing companies, utilities services, dry cleaners and laundries and a variety of other recreational and entertainment options.
Furthermore, the indirect positive impacts created by the casino industry on the U.S. economy reach across our nation — from the computer software designer in Washington to the cotton plant worker in Mississippi to the cattle rancher in Wyoming.

The bottom line shows that the gaming sector is a dynamic, growing contributor to economic growth in this country, and it provides solid, meaningful employment to hundreds of thousands of Americans. This is not the result of an economic model. It is not a theory concocted in an ivory tower. It is hard, solid, irrefutable evidence available from many of the studies I have mentioned, and there are other studies that confirm what those reveal.

The generation of hundreds of thousands of jobs, billions of dollars in tax revenues and massive commercial development by the casino gaming sector translates into generous social benefits for many Americans…and not only those who work directly for the industry. This is too often lost in discussions that revolve around so—called “social costs” of gaming. Any discussion of what is more accurately described as the social impact of gaming should weigh the benefits against the costs — the veracity of which are themselves highly questionable — for a full and fair consideration of our business.

As numerous studies and as testimony before this commission have revealed, the casino industry has made an invaluable contribution in the welfare—to—work area, providing tens of thousands of jobs to those formerly on welfare or receiving unemployment benefits. In the process, payments under the Aid to Families with Dependent Children (AFDC) program have decreased appreciably in gaming communities, as have food stamp distributions.

The casino gaming industry has also improved the lives of its employees and their families by elevating job skill levels, most of which are transferable to other types of employment. We provide special education and training programs and we protect our work force with superior job benefits, such as top—notch health care and day care programs.

Madam Chairman and members of the commission, I am sure you will recall that a number of gaming industry employees appeared before you during the first public meeting of the commission. It was a wonderful experience for these fine people who were proud to talk about their industry and who were grateful to you for allowing them to appear. I would like to remind you of the testimony of one man, Stephen Karaisz, Jr., who told you:

When people ask me if I like what I do, I tell them “it’s not what I do, it’s what I am. What I’ve become.”
[The casino industry provides] security for your family as well as providing excellent benefits packages, retirement and investment opportunities, low cost loans and mortgage payments, housing starts, tuition reimbursement and scholarships for our kids.
Factual, unbiased, solid research also shows that women and minorities are primary beneficiaries of the casino gaming industry. As you have heard during testimony and read in information provided to you, they account for a large percentage of the casino work force. Businesses owned by women and minorities also benefit greatly from procurement by casinos, which consistently exceed rates set by government authorities for purchasing from this sector.

And we have made a special effort to include the disabled in our work force. In Atlantic City, for example, 8.2 percent to 12.3 percent of the persons working in casinos are disabled. A study of the industry’s hiring practices reported:

…the conclusion must be that the percentage of disabled persons employed at the Atlantic City casinos compares favorably with the percentage of persons in the labor pool, no matter how that pool is determined.
We have a talented, diverse work force. We are proud of our employees and pleased to be able to provide them with the benefits they deserve. We are also proud of what they give back to the community. Casino employees are major contributors to charitable organizations throughout the country. They donate hundreds of thousands of hours in volunteer time to worthy causes…along with millions of dollars.

Now, as to those “social costs.” Close scrutiny finds that these are either greatly exaggerated or completely false. For example, contrary to the claims of gaming opponents, studies indicate that crime does not increase with the advent of this activity in a community. In fact, crime more often than not decreases after gaming arrives. As one study revealed:

[There is] little evidence to support the notion that the presence of casino gaming in a community has any meaningful impact on crime rates. It appears that crime rates are a reflection of the complex interplay of demographic and social factors and not due to the presence or proximity of legalized gaming.
Furthermore, this study found that the debate over the relationship between gaming and crime has often been marked by the use of anecdotal research, statistical slight of hand and statistical distortions. Much of this has led to sweeping and erroneous conclusions about entire populations, industries and cultural patterns.

Also, valid, scientific studies of bankruptcy and suicide rates — often cited by gaming opponents as consequences of gaming — show that neither is more prevalent in gaming communities than in nongaming communities. A recent study on suicide rates concluded that:

When standard statistics are used and when the masking effects of extraneous factors are controlled, suicide levels in Atlantic City, Las Vegas and other U.S. casino resort areas are about average compared to nongaming areas.
Indeed, the gaming industry in the United States demonstrates clearly that it is a progressive, positive force in American life. Again, that is not theory. That is not derived from any model. That is hard, solid, irrefutable fact.

As you have come to understand during your investigations, casino gaming is one of the most highly regulated industries in the United States, as strictly regulated as the banking, securities or nuclear energy industries. In Nevada and New Jersey alone, more than 1,000 regulators work at a cost to the industry of an estimated $70 million.

The rigorous investigation that a casino license applicant must endure in most states is an exercise that I doubt any of us has ever had to endure in our professional lives. The personal disclosure form employed by the Illinois Gaming Board runs 54 pages. Typically, these forms ask for details on such matters as identity of family members, residential history…which can go back as far as 25 years, employment history, educational history…which can go back as far as grammar school, litigation history, licensure history, financial and tax information…not only for the prospective licensee but also for spouses and children and sometimes other family members.

Consider also that most of the major casino companies are publicly owned. As publicly owned companies, they are subject to regulation by, and file extensive and regular disclosures with, the Securities and Exchange Commission (SEC). In essence, then, the SEC provides a second regulatory layer overseeing the gaming entertainment business.

Many retirement funds also own large portions of the industry’s stock. This level of investment adds yet a third layer of regulation: public opinion. Large, publicly traded corporations are extremely sensitive about negative publicity or any issue that might raise concerns with stockholders, stockbrokers and investment analysts.

There is very little about the gaming industry that is not dissected, studied, zealously inspected and carefully regulated. Certainly, there is nothing theoretical about this aspect of the casino gaming industry. It is all about facts — solid, irrefutable factual information.

Madam Chairman, members of the commission, throughout your consideration process, there has been a vigorous exchange of opinions on casino gaming and related matters. It has been healthy, stimulating and educational. But no matter what views you heard expressed on this subject, you heard agreement from all sides that serious attention must be accorded to disordered gambling. While a vast majority of Americans can enjoy gaming responsibly, there are those who cannot, and these people must be helped.

As we have seen, disordered gambling is complex and difficult to understand. The lack of agreement on the terminology to be used only compounds the difficulty. That has led to the development of disparate and often conflicting information about the number of people who suffer from gambling addictions. Opponents of gaming have put the number as high as 11 percent of the population, but the recent study by the Harvard Medical School Division on Addictions — Estimating the Prevalence of Disordered Gambling Behavior in the United States and Canada: A Meta—analysis — indicates that 1.29 percent of the adult population could be classified as having serious pathological problems incident to gambling. The Harvard study also indicates that the majority of those people with gambling disorders also experience other psychiatric disorders, such as alcoholism, drug abuse and depression.

Howard J. Shaffer, director of the Harvard Medical School Division on Addictions and lead author of the meta—analysis, described the findings of his study in testimony before this commission. He described the serious nature of the illness and the responsibility we all have to assist those who require our attention. He also told this commission something else that I believe bears repeating in his words. He said:

At the risk of being misinterpreted and misrepresented, I’d like to note that many economists, researchers and social policymakers have made two important assumptions about disordered gambling that are often incorrect. It’s incorrect that all gamblers who experience problems with gambling eventually progress to become level three or pathological gamblers. Just as most people who occasionally feel depressed do not progress to a state of clinical depression, most gamblers with level two gambling—related problems do not experience a progression to level three states.
Further, in addition to professional treatment, there are many different pathways out of disordered gambling. Gamblers Anonymous, perhaps, is best known, but natural recovery is certainly another pathway out of disordered gambling.
Current research has not identified reliable methods for determining which gamblers will develop gambling disorders, or who will recover with or without treatment.
Furthermore, without precise estimates of the duration of gambling disorders, and the extent of people who recover without any treatment at all, it’s not possible to estimate accurately the economic and social impact of disordered gambling.
While the rate of disordered gambling among adults may continue to increase, such an increase is not without end. Just as Americans have been reducing their use of tobacco and alcohol during the past two decades, in spite of the widespread availability of these products, the rates of gambling excess will also begin to diminish as people learn of the potential personal and social risks associated with gambling. This has happened on two previous occasions, it’s likely to happen again.
I think it is vitally important for all of us to keep Dr. Shaffer’s words in mind as we work to help those with gambling problems. We must be certain that we are focusing our efforts and resources effectively to get help to those who need it. We must not spin our wheels on a matter so important.

In this regard, we must also have a better understanding of the causal factors related to disordered gambling. We must improve diagnostic methods and identify empirically valid prevention and treatment programs. I’m proud to note that the commercial casino entertainment industry — working with the American Gaming Association — founded the National Center for Responsible Gaming (NCRG) in 1996 to fund research on disordered and pathological gambling. Twenty—two gaming entertainment companies and one foundation have committed almost $5 million to the National Center. Since it was founded, the NCRG has awarded 19 grants totaling nearly $2.6 million to respected universities and medical research centers such as Harvard Medical School, Washington University School of Medicine and Massachusetts General Hospital.

Current investigations are examining disordered gambling from a variety of disciplines. The National Center is continuing to support the grant made to Harvard Medical School last year that resulted in the comprehensive study of problem gambling. NCRG—supported research projects are also exploring the neurobiology of disordered gambling behavior through brain imaging, genetics and drug trials. Recognizing that the environment plays a crucial role in mental health disorders, the National Center has committed funds to research in the behavioral and social sciences as well.

As we know, a number of treatment programs do currently exist to attend to those with gambling problems. These range from group programs to more individual and specialized treatments established by state governments and by private foundations, many of which are underwritten by the gaming industry.

We in the casino gaming industry have declared that “one problem gambler is one too many.” We are absolutely committed to working for the development and implementation of education, prevention and treatment programs for disordered gambling.

To facilitate that, the casino entertainment industry, in conjunction with the AGA, has developed and adopted comprehensive voluntary guidelines to address all aspects of disordered and underage gambling to ensure that customers and employees have the necessary information to seek help, if needed.

We are also developing a voluntary program pertaining to advertising and marketing of gaming in casinos operated by members of the AGA. The purpose of the program will be two—fold:

To ensure responsible and appropriate advertising and marketing of casinos to adults that reflects generally accepted contemporary standards; and
To avoid casino advertising and marketing materials that specifically appeal to children and minors.
And in keeping with our commitment to responsible gaming, the industry is also particularly sensitive to the need for reasonable, workable practices that govern credit policies. To this end, stringent procedures — both mandatory and voluntary — have been instituted regarding the extension of credit. We are also aware of the need to address responsible gaming practices as they relate to the use of Automated Teller Machines (ATMs) and credit card advance machines. The industry is, therefore, developing materials that explain the responsibilities of the user and the casino concerning these conveniences. These materials will also identify where patrons with gambling problems may turn for help.


INDUSTRY ACTIVITIES

At this point let me interject that these activities are nothing new for the casino gaming industry. We have a history of encouraging and instituting responsible gaming practices. This poster provides an overview of our initiatives in this area. Since the AGA was formed in 1995, we have built on those programs, spearheading a Responsible Gaming National Education Campaign to encourage the establishment and promotion of responsible gaming practices industrywide.

As part of this long—term campaign, the AGA designated the week of Aug. 3—7, 1998, “Responsible Gaming Education Week.” During this weeklong event — which will be held annually — companies devote activities to increasing awareness among employees and the general public about disordered gambling and the importance of responsible gaming. Last year, the week also included an AGA—sponsored “Best Ideas” contest for industry employees promoting the education theme. The contest featured several different categories and winners in each category were awarded $1,000. More than 500 contest entries were received.

To assist casino properties in promoting the event, AGA developed a comprehensive packet of information that contained a list of suggested activities, an article on “Responsible Gaming Education Week” that could be included in a company newsletter, brochures on disordered gambling, samples of promotional flyers, paycheck stuffers and a poster. This packet was delivered to 142 properties nationwide.

The AGA has also conducted seminars on disordered gambling and on responsible gaming programs and practices at the annual World Gaming Congress & Expo, including one on “Understanding Gambling and Its Potential Health Consequences, which was co—sponsored by the National Center for Responsible Gaming, the Nevada Council on Problem Gambling and Harvard Medical School. This same seminar was featured at the Southern Gaming Summit and co—sponsored by the Mississippi Casino Operators Association and the Mississippi Council on Problem Gambling.

We have also conducted responsible gaming certification courses at the World Gaming Congress & Expo. These courses were moderated by experts in the field of disordered gambling and were designed to increase awareness, introduce innovative programs, and further educate casino employees and regulators. We have conducted responsible gaming workshops, which are seminars developed by the AGA Responsible Gaming Task Force to provide casino employees with an overview of disordered gambling and responsible gaming programs.

The AGA has developed a variety of materials intended to teach gaming industry employees about disordered gambling and how the problem should be addressed. These materials include a comprehensive Responsible Gaming Resource Guide, which was developed in collaboration with Carl Braunlich of Purdue University and Marvin Steinberg of the Connecticut Council on Compulsive Gambling. The resource guide is widely used and is now in its second edition. We have also published an educational pamphlet titled, “A Discussion of Disordered Gambling and Responsible Gaming.”

We have collaborated with third parties, including the National Center for Missing and Exploited Children, state problem gambling councils and the Harvard Medical School Division on Addictions, on issues of mutual concern. In this regard, with technical assistance from the National Center, casino employees in Las Vegas, Atlantic City, and the Mississippi Gulf Coast received training on how to respond to cases of unattended children on or outside casino properties, in addition to training through other AGA—sponsored seminars.

As part of our ongoing Responsible Gaming National Education Campaign, the AGA will produce a tool kit including sample brochures, posters and training curricula. The curricula, developed for use by gaming industry employees, focus separately on disordered gambling and on underage gambling prevention.

The casino gaming industry is not a “johnny come lately” to the issue of problem gambling or to responsible gaming practices. We have been a committed advocate of research to discover more about the illness that afflicts those who cannot gamble responsibly, and we have instituted programs and practices that foster responsible gaming.

Recommendations

But I certainly do not want to leave anyone here today with the mistaken impression that we are satisfied with the way things are. Of course, there is always room for improvement. And I would like to tell you where that room lies.

The following is a comprehensive list of recommendations from the American Gaming Association (AGA) to the National Gambling Impact Study Commission as it prepares its final report. Our recommendations incorporate the views of experts in the fields of law, social science, law enforcement, criminal justice, economics and addiction research.

GENERAL

Regulation and taxation of gaming, with the exception of Native American and Internet gaming, is a state responsibility under the 10th Amendment to the Constitution; do not undermine the states’ ability to regulate gaming within their borders.

Rely on facts, not myths, stereotypes and propaganda in reaching your conclusions.

Freedom of choice is the building block of American democracy. Protect the rights of individual Americans who choose to be entertained and pursue employment opportunities in the gaming industry.
ECONOMIC IMPACTS

Numerous studies, as well as public testimony before the commission, have documented the economic impact of gaming in every jurisdiction in which it operates. Not only is gaming a significant contributor in terms of tax revenue, jobs and wages, but it also creates indirect growth through increased retail sales, residential and commercial construction, and other capital investment.

Rely on actual data and statistics; economic models or projections are no longer needed to reach accurate conclusions.

Consider federal, state, local and corporate taxes; job creation; annual payroll; capital investment; and infrastructure improvements.

Consider also the indirect economic impacts such as dollars spent on goods and services; retail sales; new business creation; and commercial and residential construction.

Reject outdated theories that allege that gaming is predatory, taking from other established businesses without creating growth of its own within the economy. Actual statistics demonstrate that casino gaming helps to diversify and expand the local economy.

Rely on gross gambling revenue, not handle, to compare one form of gambling to another or to other businesses, industries or the general economy. Gross gambling revenues reflect the actual cost to consumers and the revenue derived by operators before taxes. Handle is the gross amount wagered and does not reflect the amount won back by players.
SOCIAL IMPACT

One of the most common arguments made by opponents is that “social costs” of gaming outweigh any economic benefits. What they don’t take into account is the fact that “social costs” only tells part of the story. The “big picture” view of the impact of gaming on American society shows that this business is a net positive generator of jobs, tax revenue and commercial development, among other benefits. This translates into general social benefits, which too often are lost in discussions that revolve around these so—called “social costs” of gaming. Any discussion of the social impact of gaming should weigh the full range of benefits with documentation of actual costs for a fair consideration of the issue.

Consider the social benefits as well as the so—called social costs.

Consider employee and family access to health care, employee access to day care, development of new job skills, percentage of employees that have left welfare or eliminated welfare benefits as a result of casino employment, reductions in unemployment rates, charitable contributions and volunteer time given to charitable organizations.